From page 4 of today's City AM:
Under existing rules builders are required to designate a set percentage of every development either for housing associations or available at a reduced price. The coalition says this requirement can be too onerous and will allow developers an opt-out if they can prove that it economically unviable to develop a site.
It is nearly always 'economically viable' to build a house. The developer buys £30,000's worth of concrete, timber and bricks etc and sells the finished house for £80,000-plus. That £50,000 is the normal earned income of the develoepr, architect, bricklayer, carpenter etc. Anything above that is pure, unearned profit, i.e. land value.
Rather bizarrely, on page 24 of the same edition, they explain all this (without suggesting the obvious solution):
Firstly, house prices are nothing to do with [construction] costs. They’re actually about land values. Rising house prices are not bricks and mortar turning to gold, but represent the rising value of land with residential planning permission. In Oxford, a hectare of land for agricultural purposes costs £20,000 compared to £4m for residential use...
As the planning system won’t release enough land over the long term, developers feel protected from land prices falling. This is why the £10bn in loan guarantees for developers building new homes, announced by the government yesterday, showed a disastrous misunderstanding of the system. They mean that, if land prices rise, the developer wins anyway. But, if prices fall, the taxpayer is liable. Not sensible.
Developers complain that there isn’t enough mortgage finance. But what they really mean is that there isn’t enough mortgage finance available to prop up existing land prices.
Money For Nothing
1 hour ago
3 comments:
"They mean that, if land prices rise, the developer wins anyway. But, if prices fall, the taxpayer is liable. Not sensible."
unless you are a developer. Looks like money well spent on donations to the Tory party.
Firstly, house prices are nothing to do with [construction] costs. They’re actually about land values. Rising house prices are not bricks and mortar turning to gold, but represent the rising value of land with residential planning permission.
Yes and what is the point which comes from that?
JH: "what is the point which comes from that?"
Depends which side of the fence you are on, it's either
a) Buy land, it's an easy way to more or less guarantee good profits for absolutely no work.
b) that land values are entirely unearned and we can achieve better outcomes by taxing land values.
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